Selling products through online marketplaces and auction sites has become increasingly popular with home-based businesses because of the low startup costs, flexibility and the feeling of being in control of your own business.

James Ward is an illustrator who has a "shop" on Etsy.com. Because of his Etsy page, he was commissioned to design a T-shirt for the sportswear company Lacoste. "They saw my Cat Doll print and wanted a similar design featuring a crocodile in a dress waving a tennis racket around, he says on his Etsy Blog. "I absolutely loved this job – I was given a free rein to produce the image I wanted."

ChannelUnity, a UK marketplace integration startup, has capitalised on the growth of online home-based businesses since it started in 2009. The company specialises in connecting retailers to online marketplaces such as Amazon, eBay and Play.com.

Mark Newby, co-founder and chief executive, extolls the virtues of online marketplaces: "We've enabled a home webtailer to sell lingerie from his garden shed, while a jewellery webtailer can call our support team for help during his lunch break at his day job, arranging shipment of his customers' purchases before work the next morning. In each case, the retailer had a website but didn't get many direct sales and had to spend heavily on pay-per-click advertising to achieve these. When we helped these retailers to sell on marketplaces such as Amazon, they quickly found a channel which brought in much more revenue than their own website."

Wilma Mae Basta started her vintage clothing business The Gathering Goddess using an eBay store. She says: "I started buying vintage on eBay, and when I amassed a huge collection, I began to put some of my finds back onto eBay. At the time, it was the easiest way to shift a huge amount of stock and make a good profit."

Basta now has a physical shop in Notting Hill, west London. She says: "We use other online channels such as Etsy, Vintage Seekers, V&M, Fab.com and our own ecommerce site. We have also just launched Vintage Screenings in conjunction with The May Fair Hotel. Basically, the concept is a series of screenings of classic films in a glamorous setting, where our guests can enjoy a cocktail and shop our luxury range of vintage fashion before and after the film."

Basta adds: "For the kind of brand we have evolved into, eBay is no longer the right platform for us. Although I no longer use it, eBay is good for vintage if you employ certain strategies, such as high-end collectors' pieces or super low priced auctions."

UK spokeswoman Georgina Blain says that Etsy.com is very aware of the type of vendor who uses their website: "We have a large number of home-based businesses – stay-at-home mums who have started a business, or those just starting out who want to limit their initial outlay costs. Some sellers have full-time jobs, and their Etsy shops are run in their spare time. There are also sellers who are more established and have been able to invest in their own workspace or studio. Last year we worked with art students and graduates so we saw a number of younger designers coming to us."

Notonthehighstreet.com has a different approach. Founders Holly Tucker and Sophie Cornish say: "We have a strict vetting procedure, but if accepted, we work closely together to ensure each partner is supported and promoted to become a successful, viable business."

Both Tucker and Cornish have noticed a trend in the number of products that can be personalised or customised being sold on their website: "Products that can be personalised have always been popular on notonthehighstreet.com, and we are now seeing how this particular trend has developed to become even more meaningful."

So there are many opportunities for retailers to sell their products via online auction sites and marketplaces. However, paying the correct amount of tax still remains an issue. Last year, HMRC launched its e-marketplaces campaign which offered the opportunity for e-traders to come forward voluntarily and disclose whether they had been paying the correct amount of tax. The campaign – which closed in September 2012 – raised more than £650,000.

HMRC believes that the majority of the e-trader community, which it estimates at 300,000 people, do pay the right amount of tax. Its advice is: "If you are just selling some unwanted items online, the answer is probably that you are not liable to tax. In order to pay tax on the goods you sell, you either have to be trading or make a capital gain. If you are trading you will be self-employed."